China catching up to US in foreign aid flow: report

AP, BEIJING

China is close to matching the US as a source of official grants and loans to developing nations, but much of Beijing’s financing serves its own economic interests and yields scant benefits for recipients, a multinational group of researchers reported yesterday.

The research by AidData, a lab at the College of William & Mary in Virginia, is the most extensive effort yet to measure official financing by China, which releases few details of its aid flows.

China gave or lent US$354.4 billion in the 15 years ending in 2014 in Africa, Asia and elsewhere, compared with US$394.6 billion for the US, according to AidData.

The lab released a database of Chinese financing, assembled from thousands of sources of information, and a study on its effects by scholars from Harvard University, Germany’s Heidelberg University and William & Mary.

“At the very top level, you could say the US and China are now spending rivals when it comes to their financial transfers to other countries,” AidData executive director Bradley Parks said.

China’s secretiveness about its spending has fueled complaints that its aid might prop up corrupt regimes or undercut environmental and human rights standards Western donors are trying to enforce.

Attention to Chinese financing has increased as Beijing promotes its “Belt and Road Initiative” to expand its trade links with Asia, Africa and the Middle East by building ports, roads and other facilities.

About 23 percent of Chinese spending met the Organisation for Economic Co-operation and Development’s (OECD) definition of aid, or “official development assistance,” which requires at least 25 percent of a transfer to be a grant.

By contrast, 93 percent of US spending qualifies as aid.

The bulk of Beijing’s financing appears to be export credits and other measures aimed at promoting Chinese exports or other goals, which produced little growth in recipient economies, Parks said.

Such “official finance” does not count as development assistance, but is part of the OECD’s broader definition of aid, he added.

The portion of Chinese financing that qualifies as aid “substantially improves economic growth,” the report said, adding that results were comparable to the effects of US and other Western-financed projects.

The five-year-old project used a computerized system to look for information from more than 15,000 sources including news reports, Chinese government offices, ministries of other countries and academic reports. Its data cover 4,304 projects in 138 nations and territories.

“The data show that China’s lending is indiscriminate with respect to governance. Some big borrowers have poor rule of law, such as Venezuela, Angola and Pakistan,” said David Dollar, an economist at the Brookings Institution in Washington and former World Bank country director in Beijing.

“The overall pattern of lending indicates that it is demand-driven by which countries want to borrow rather than by a Chinese master plan,” he added.

The data show more Chinese finance goes to countries that vote with Beijing at the UN, Parks said.

That “might not look good,” but a similar analysis of US and other Western donors shows they act the same way, he said.

Parks said the project did not try to measure whether Chinese aid undercuts environmental or other standards by giving an alternative to more stringent conditions on Western aid.